Economic Brief

May 2013, No. 13-05

Does Money Still Matter for Monetary Policy?

Economists agree that inflation is a monetary phenomenon, but since 1982, monetary policymakers have demoted measures of the money supply from prime targets to key indicators to incidental byproducts. With excess bank reserves at all-time highs, however, measures of money may have a renewed purpose as red flags for inflation.

Friedman, Milton, "The Role of Monetary Policy," Presidential Address to the American Economic Association, Washington, D.C., December 29, 1967, published in the American Economic Review, March 1968, vol. 58, no. 1, pp. 1-17.